20 Macro economics multiple choice questions.

A key theme fundamental to all of economics is: (Points : 2)

       There are limited wants.
       We are a rich country but are simply not aware of it.
       People have unlimited wants facing limited means to satisfy them.
       There are unlimited resources.

2. Use the following to answer question 3:
Figure: Guns and Butter

Refer to the above figure. If the economy were operating at point B, producing 16 guns and 12 pounds of butter per period, a decision to move to point E and produce 18 pounds of butter: (Points : 2)

       indicates you can have more butter and guns simultaneously.
       makes it clear that this economy experiences decreasing opportunity costs.
       involves a loss of 8 guns per period.
       involves a loss of 4 guns per period.

3. Technological improvements will: (Points : 2)

       leave the production possibility frontier unchanged.
       shift the production possibility frontier inward.
       shift the production possibility frontier outward.
       necessarily lead to increased unemployment.

4. Which of the following best describes the law of demand? (Points : 2)

       As income taxes rise, fewer new cars are purchased.
       As the price of corn rises, more acres of corn are planted.
       As the price of a DVD rental rises, fewer DVDs are rented.
       As the population rises, more electricity is consumed.

5. What will happen in the market for canned pinto beans if your income increases? (Points : 2)

       Demand will increase if pinto beans are an inferior good.
       Demand will increase if pinto beans are a normal good.
       Supply will increase if pinto beans are an inferior good.
       Supply will increase if pinto beans are a normal good.

6.
Refer to the above figure which shows Demand for Coconuts. If pineapples are substitute for coconuts and the price of pineapples increases, it will be represented in the figure as a movement from: (Points : 2)

       A to C.
       B to A.
       C to A.
       B to E.

7. The market for lemonade is in equilibrium and the price of sugar rises. How will this affect the lemonade market? (Points : 2)

       Demand will decrease, decreasing the price and decreasing the quantity.
       Demand will decrease, increasing the price and decreasing the quantity.
       Supply will increase, decreasing the price and increasing the quantity.
       Supply will decrease, increasing the price and decreasing the quantity.

8.
Refer to the above figure which shows the Market for Candy. A surplus of the good will exist at a price of:
(Points : 2)

       P1.
       P2.
       P3.
       There are no surpluses in this market.

9. An example of an intermediate good is: (Points : 2)

       wages paid to an employee.
       steel purchased by aircraft manufacturers.
       vegetables purchased for your dinner.
       electric bills for your home.

10. Which of the following would NOT be included in this year’s GDP? (Points : 2)

       the production of a television show
       the purchase of a new truck
       the hiring of a new police officer
       your purchase of your neighbor’s 2001 Toyota

11. For measuring a nation’s standard of living, of the following, the best available common measure is: (Points : 2)

       nominal GDP.
       market GDP.
       per capita real GDP.
       per capita nominal GDP.

12. The inflation-adjusted measure of aggregate output typically used by economists is called: (Points : 2)

       consumer price index.
       nominal gross national product.
       net domestic product.
       real gross domestic product.

13. If the price level in the economy and the nominal wages both doubled, then real wages would: (Points : 2)

       also double.
       increase by half.
       remain unchanged.
       decrease by half.

14. Which one of the following price indexes measures the cost of living? (Points : 2)

       producer price index
       wholesale price index
       consumer price index (CPI)
       GDP deflator

15. Assume that the CPI for 2009 was 124.0 and for 2010 was 130.7. What was the inflation rate between the two years? (Points : 3)

       0.95%
       5.40%
       6.70%
       3.20%

16. The natural rate of unemployment: (Points : 2)

       equals zero.
       equals the actual rate of unemployment when cyclical unemployment equals zero.
       equals cyclical and actual rates of unemployment.
       equals cyclical plus frictional rates of unemployment.

17. Suppose banks are issuing personal loans at an interest rate of 9%. If expected inflation is 3%, then the: (Points : 3)

       nominal interest rate is 6% and the real interest rate is 9%.
       real interest rate is 6% and the nominal interest rate is 9%.
       real interest rate is 3% and the nominal interest rate is 9%.
       nominal interest rate is 6% and the real interest rate is 12%.

18. If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its labor force is: (Points : 3)

       335 million.
       200 million.
       155 million.
       150 million.

19. If a country has a working-age population ( 16 and older) of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is: (Points : 3)

       4%.
       7.5%.
       10%.
       67.5%.

20. For most of U.S. modern economic history, when the unemployment rate is _____, real GDP is _____. (Points : 2)

       falling; rising
       falling; falling
       rising; unchanged
       rising; rising

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